The Special Needs Trust Fairness Act provides that
individuals with disabilities can now create their own special needs trusts
instead of having to rely on others. The Act was included as Section 5007 of
the 21st Century
Cures Act which was signed into law by the President on December 13,
2016.
The Act corrects an error in existing law that has created
needless delay and legal expense for many disabled individuals. Congress first
established rules for special needs trusts in 1993. One common type is the
self-funded special needs trust (also known as a (d)(4)(A) trust) which is
authorized by Section 42 U.S.C. §
1396p(d)(4)(A) of the Medicaid law.
This type of trust is created from the funds of a disabled
beneficiary. It allows a beneficiary who is receiving Medicaid to protect
some savings for later use in paying for critical living expenses without
losing their equally critical Medicaid benefits.
But due to a drafting error in the 1993 law disabled
individuals have not been permitted to create their own trusts. For the past 23
years the law has stated that only a parent, grandparent, legal guardian of the
individual, or a court can establish this type of special needs trust. In
effect the law has presumed that the disabled individual lacks the mental
capacity to handle this aspect of their financial affairs.
This has resulted in unnecessary delays and legal and court
costs for individuals who wish to establish a special needs trust but do not
have parents or grandparents to help them. These individual have been forced to
petition the court to set up the trust.
Under the new law capable individuals with disabilities are
now able to set up their own special needs trust without having to petition the
court and undergo unnecessary legal costs.
In recognizing that many disabled individuals are competent
to manage their finances this new law is similar to another recent law which
authorizes some disabled individuals to create ABLE
accounts. ABLE accounts are useful but have many restrictions that do
not apply to special needs trusts.
Disabled individuals should seek the advice of an experienced
elder law/special needs lawyer to help evaluate their options. If you reside in
Pennsylvania, you can contact my law firm, Marshall,
Parker and Weber, for expert advice.
Further Reading
The Special Needs Trust Fairness Act is located in Title V,
Section 5007 (page 440), of the 21st Century
Cures Act.
Pass
the Special Needs Trust Fairness Act (Marshall, Parker and Weber blog,
September 28, 2015).
New
Law Authorizes PA ABLE Savings Accounts (Marshall, Parker and Weber
blog, April 19, 2016).